SUPREME COURT OF THE STATE OF CONNECTICUT SC ARTIE'S AUTO BODY, INC., et al. THE HARTFORD FIRE INSURANCE COMPANY

Transcription

1 SUPREME COURT OF THE STATE OF CONNECTICUT SC ARTIE'S AUTO BODY, INC., et al. v. THE HARTFORD FIRE INSURANCE COMPANY BRIEF OF THE PLAINTIFFS-APPELLEES ATTORNEYS FOR PLAINTIFFS-APPELLEES: David A. Slossberg David A. Belt Nicole H. Najam HURWITZ SAGARIN SLOSSBERG & KNUFF, LLC 14 7 North Broad Street Milford, CT Tel: Fax: Juris No DSlossberg@hssklaw.com Alan Neigher BYELAS & NEIGHER 1804 Post Road East Westport, CT Tel: Fax: TO BE ARGUED BY: Ronald J. Aranoff BERNSTEIN LIEBHARD LLP 10 East 40 1h Street, 22 n d Floor New York, NY Tel: Fax: David A. Slossberg

2 TABLE OF CONTENTS COUNTERSTATEMENT OF ISSUES... v TABLE OF AUTHORITIES... viii INTRODUCTION Plaintiffs' Claims of Unfair Trade Practices The Hartford's Efforts to Change the Facts of the Case The Trial Court Rejected The Hartford's Efforts to Avoid the Consequences of its Violation of "Deeply Rooted" Public Policy The Hartford's Efforts to Change the Law The Hartford Cannot Avail Itself of Preemption Under Acordia The Awards of Punitive Damages and Injunctive Relief Must Stand STATEMENT OF FACTS AND PROCEEDINGS I. The Jury Verdict and Jury Interrogatories... 9 II. The Hartford's Conduct Clearly Violates CUTPA Because it Offends Connecticut Public Policy Under the Physical Damage Appraisers' Code of Ethics A. The Evidence at Trial was Clear; The Hartford Required its Appraisers to Violate their Responsibility to Conduct Fair and Impartial Appraisals... 9 B. The Hartford's Efforts to Cover Up its Labor Rate Practices Evidences its Knowing Violation of Connecticut Public Policy C. The Trial Court's Charge Provided the Only Reasonable Interpretation of the Code of Ethics Ill. Post-Trial Decisions A. Motions to Set Aside the Verdict B. Trial Court's Award of Punitive Damages... 15

3 C. Trial Court's Award of Injunctive Relief ARGUMENT I. The Court Should Not Change the Longstanding, Well-Settled Law Under CUTPA for Determining Unfair Trade Practices, Especially After Ten Years of Protracted Litigation in This Class Action A. The Plain Language of CUTPA and the Congressional Record Dispositively Establish That There is No Legal Basis for Abandoning the Cigarette Rule B. The Cigarette Rule Should be Maintained as the Well-Settled Standard in This State Unless Changed by the State Legislature The cigarette rule for determining unfairness was the standard applied by the FTC in 1973 when CUTPA was enacted and has been the well-settled law of this state for decades The legislature's non-action for three decades in the face of well-settled application of the cigarette rule validates the Court's interpretation of CUTPA, and as held by the most recent state supreme court to confront this issue, the cigarette rule should continue to apply unless changed by the legislature The large majority of states with statutes prohibiting unfair acts or practices apply some variation of the cigarette rure Both the FTC Act and CUTPA were intentionally written with expansive language so as to reach conduct beyond existing common law or statutory prohibitions The concept that a statute or regulation has a "penumbra" in which it is applicable beyond its narrow, literal words, has frequently been applied by the courts and is not unique to CUTPA or to the cigarette rule ii

4 6. Limiting CUTPA to the standard of illegality (i.e., the "substantial injury test") set forth in 15 U.S.C. 45(n) would restrict the scope of CUTPA, provide less guidance for businesses and consumers, and increase the cost and uncer1;ainty of litigation Under no circumstances should any change be applied retroactively in this case C. This Case is Not Suitable for Considering Whether to Change the Well-Settled Standard of Unfairness II. Ill. The Trial Court Did Not Abuse its Discretion in Denying Defendant's Belated Motion for Reconsideration The Trial Court Did Not Abuse its Discretion in Awarding Punitive Damages A. An Award of Punitive Damages Under CUTPA Does Not Require a Finding of Immoral, Unscrupulous, Unethical, or Oppressive Behavior B. The Evidence at Trial Supports the Trial Court's Finding That The Hartford's Conduct Reveals Reckless Indifference to the Rights of Appraisers and Body Shops IV. The Trial Court Did Not Abuse its Discretion in Awarding the Carefully Crafted Injunctive Relief to Remediate The Hartford's Unfair Trade Practices V. Plaintiffs' CUTPA Claim is Not Preempted by CUIPA A. Defendant has Waived This Argument Having Not Preserved the Issue for Appeal B. Even had the Defendant Preserved the Issue, CUIPA Does Not Preempt the CUTPA Claim Made in This Case VI. Even if the Court Were to Decide Not to Affirm the Jury Verdict, Which it Should Not, It Cannot Enter Judgment for Defendant Because of Material Errors by the Trial Court Regarding Core Evidentiary Issues in the Case CONCLUSION iii

5 COUNTERSTATEMENT OF ISSUES This is an appeal from a judgment based on a jury verdict that The Hartford Fire Insurance Company ("The Hartford") committed unfair acts and practices in violation of the Connecticut Unfair Trade Practices Act ("CUTPA") by violating the public policy of Connecticut - clearly expressed in State regulations - that require an automobile physical damage appraiser to conduct "fair and impartial appraisals," to "disregard any efforts on the part of others to influence his judgment or the interests of the parties involved," and to prepare "an independent appraisal of damage." The jury awarded $ million in compensatory damages to the plaintiff class of more than one thousand Connecticut auto body shops based on the suppression of labor rates caused by The Hartford's improper control of its staff appraisers. The trial court awarded $20 million in punitive damages, having found that The Hartford "knowing ly and purposefully for the enhancement of its own profits" engaged in the conduct that violated CUTPA, including efforts to cover up its unlawful practices. The trial court also entered a permanent injunction. The judgment below raises the following issues on appeal. 1. Whether the judgment should be affirmed in all respects because: a. The plain language of CUTPA and the congressional record dispositively establish that there is no legal basis for abandoning the cigarette rule (Pages 17-20). b. The cigarette rule should be maintained as the well-settled standard in this state unless changed by the state legislature (Pages 20-30). c. It would be unjust, inequitable and improper to make any changes in the legal standard for determining unfairness, which this Court has applied for more than three decades, including the more than ten years this case has been pending (Pages 30-31). iv

6 d. This case is not suitable for considering whether to change the wellsettled standard for determining unfairness where The Hartford was sanctioned for refusing to produce evidence relevant and material to determining unfairness under the substantial injury test-- the very standard urged by The Hartford for adoption here (Pages 31-32). 2. Whether the trial court's denial of The Hartford's motion for reconsideration should be affirmed because the trial court did not abuse its discretion in determining that the materials from the Insurance Commissioner on which The Hartford based its motion did not constitute newly discovered evidence and were not due any judicial deference (Pages 32-34). 3. Whether the trial court's award of punitive damages should be affirmed in all respects because the trial court properly exercised its discretion in awarding punitive damages based on its finding that The Hartford "knowingly and purposely for the enhancement of its own profits" engaged in conduct that violated CUTPA and made "efforts to hide or cover up its conduct" (Pages 34-36). 4. Whether the trial court's award of injunctive relief should be affirmed in all respects because: a. The trial court properly exercised its discretion in awarding limited injunctive relief that was narrowly tailored to address The Hartford's unlawful conduct (Page 37). b. Although the trial court in fact found that the Plaintiff class suffered irreparable harm, injunctive relief can be awarded pursuant to CUTPA without requiring a finding of irreparable harm or lack of an adequate remedy at law. (Pages 37-39). 5. Whether The Hartford's claim of preemption under the Connecticut Unfair Insurance Practices Act ("CUIPA") should be rejected because: v

7 a. The Hartford waived and failed to preserve any argument that Plaintiffs' CUTPA claim was preempted by CUIPA by: (i) failing to plead preemption, (ii) failing to request a jury charge on preemption or otherwise object to the jury charge on that basis, and (ii) failing at any point to present the issue to the trial court for determination (Pages ). b. Even had such a preemption argument been preserved for appeal, Plaintiffs' claims would not be preempted in this case because the relationship between an insurer and auto body shops is not within the "business of insurance," which defines the scope of CUIPA, and regulations governing the conduct of motor vehicle physical damage appraisers found in 38a-790-8, adopted pursuant to C.G.S. 38a- 790, provide an independent basis for a CUTPA violation (Pages 41-43). 6. Whether any outcome would allow judgment to enter for The Hartford given errors by the trial court in certain evidentiary rulings, particularly relating to Plaintiffs' ability to satisfy the substantial injury prong of the cigarette rule (Pages 43-45). vi

8 TABLE OF AUTHORITIES Page(s) Cases American Car Rental, Inc. v. Commissioner of Consumer Protection, 273 Conn. 296, 869 A. 2d 1198 (2005) Artie's Auto Body, Inc. v. Hartford Fire Ins. Co., 287 Conn. 208, 947 A. 2d 320 (2008) ASRC Energy Servs. Power & Commc'ns, LLC v. Golden Valley Elec. Ass'n, Inc., 267 P.3d 1151 (Alaska 201 1)... 18, 22, 23, 24 Associated Investment Co. Ltd. Partnership v. Williams Associates IV,. 230 Conn. 148, 156, 645 A.2d 505 (1 994)... 20, 22, 25 Banks v. Vito, No , 1992 WL 43624, (Conn. Super. Ct. March 2, 1992) Barry v. Posi-Seal International, Inc., 40 Conn. App. 577, 672 A.2d 514 (1 996)... 35, 36 Berin v. Olson, 183 Conn. 337, 439 A.2d 357 (1 981 ) Blumberg Assoc. Worldwide, Inc. v. Brown and Brown of Conn., Inc., -A.3d-, WL (February 28, 201 4) Broadnax v. City of New Haven, 270 Conn. 133, 851 A. 2d 1113 (2004) Buṙgrvn v. City of Bristol, 63 Conn. App. 98, 774 A.2d 1042 (2001 )...43 Byrne v. Trice, 170 Conn. 442, 365 A. 2d 1063 (1 976) Caldor, Inc. v. Heslin, 215 Conn. 590, 577 A. 2d 1009 (1 990)... 18, 25 Gel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4 th 163, 973 P.2d 527 (Cal. 1999) vii

9 Cheshire Mortgage Service, Inc. v. Montes, 223 Conn. 80, 61 2 A.2d 1130 (1 992) Chevron Oil Co., v Huson, 404 U.S. 97 (1 971 ) Chroniak v. Golden lnvs. Corp., 983 F.2d 1140 (1 st Cir. 1993)..., Commonwealth v. Fremont Inv. & Loan, 452 Mass. 733, 897 N.E.2d 548 (2008)... 28, 45 Conaway v. Prestia, 191 Conn. 484, 464 A. 2d 847 (1 983) , 25, 27 Conservation Commission v. Price, 193 Conn. 41 4, 479 A. 2d 187 (1 984) Crews v. Pudlinski, 129 Conn. App. 807, 21 A.3d 568 (201 1) Daddona v. Liberty Mobile Home Sales, Inc., 209 Conn. 243, 550 A. 2d 1061 (1 988) Dahlberg v. Middleboro Trust Co., 16 Mass. App. Ct. 481, 452 N. E. 2d 281 (1 983) (1 983) Department of Legal Affairs v. Rogers, 329 So.2d 257 (Fla: 1976) Eder Bros., Inc. v. Wine Merchants of Connecticut, Inc., 275 Conn. 363, 880 A. 2d 138 (2005) , 27 Fairchild Heights Residents Ass'n, Inc. v. Fairchild Heights, Inc., 31 0 Conn. 797 (2014)... 28, 37 FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1 972) , 24, 25, 26 Gargano v. Heyman, 203 Conn. 61 6, 525 A. 2d 1343 (1 987)... 34, 35 George v. Ericson, 250 Conn. 31 2, 736 A.2d 889 (1 999) viii

10 Grand Sheet Metal Products Co. v. Protection Mutual Insurance Co., 34 Conn. Supp. 46, 375 A. 2d 428 (1 977) Griswold v. Connecticut, 381 U.S. 479 (1 965) Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S. 205 (1 979)... 8, 42 Hall v. Gilbert and Bennett Manufacturing Co., Inc., 241 Conn. 282, 695 A.2d 1051 (1997) Hammerberg v. Leinert, 132 Conn. 596, 46 A.2d 420 (1946) Harne v. Deadmond, 287 Mont. 255, 954 P.2d 732 (1998) Harris v. Bradley Memorial Hosp. and Health Center, Inc., 296 Conn. 31 5, 994 A.2d 153 (2010) Hartford Electrical Supply Co. v. Allen-Bradley Co., 250 Conn. 334, 736 A.2d 824 (1999) Hasselt v. Lufthansa German Airlines, 262 Conn. 416, 815 A.2d 94 (2003) Hinchliffe v. American Motors Corp., 184 Conn. 607, 440 A.2d 810 (1981) , 35 Ivey, Barnum & O'Mara v. Indian Harbor Properties, Inc., 190 Conn. 528, 461 A.2d 1369, (1983) , 22 Jacques All Trades Corp. v. Brown, 42 Conn. App. 124, 679 A.2d 27 (1996) Johnson Elec. Co., Inc. v. Salce Contracting Associates, Inc., 72 Conn. App. 342, 805 A. 2d 735 (2002) , 28 Joseph General Contracting, Inc. v. Couto, 144 Conn. App. 241, 72 A.3d 413 (20 13) Kapunakea Parlines v. Equilor Enterprises, LLC, 679 F. Supp. 2d 1203, 1214 (D. Haw. 2009) ix

11 Labbadia v. Bailey, 152 Conn. 187, 205 A.2d 377 (1 964) Larsen Chelsey Realty Co. v. Larsen, 232 Conn. 480, 656 A.2d 1009 (1 995)... 17, 24 Legg v. Castruccio, 100 Md. App. 748, 771, 642 A.2d 906, 917 (Md. App. 1994) Liberty Glass Co., Inc. v. Allstate Ins. Co., 607 F.2d 135 (5th Cir. 1979) Martinez v. Yale-New Haven Hosp. Inc., No. 02-cv , 2005 WL (Conn. Super. Ct. Sept. 1, 2005)... : May Department Stores, Co. v. First Hartford Corporation, 435 F. Supp. 849 (D. Conn. 1997) Mccann Real Equity Services XXll, LLC v. David McDermot Chevrolet, Inc., 93 Conn. App. 486, 890 A.2d 140 (2006) McConnell v. Beverly Enterprises - Connecticut, 209 Conn. 692, 553 A.2d 596 (1 989) Mclaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 473 A.2d 1185 (1 984)...,.. 17 Mead v. Burns, 199 Conn. 651, 509 A.2d 11 (1 986)... 39, 40, 41 Minally v. Arrow Home Inspections, No , 2002 WL (Conn. Super. Ct. Nov. 19, 2002) Morrison v. Toys "R" Us., Inc., 441 Mass. 45 1, 806 N.E. 2d 388 (Mass 204) Mullin v. Guidant Corp., 114 Conn. App. 279, 970 A. 2d 733 (2009) New Breed Logistics v. CT Indy NHTT, LLC, 129 Conn. App. 563, 19 A.3d New Haven Firebird Society v. Board of Fire Commissioners, 32 COnn. App. 585, 630 A.2d 131 (1 993) x

12 Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, A.2d 1289 (1994)... 19, 23 Ostrowski v. Avery, 243 Conn. 355 (1 997) Peets v. Define, No , 1992 WL (Conn. Super) Perez-Dickson v. Bridgeport, 304 Conn. 483 (201 2) Potter v. Chicago Pneumatic Tool Co., 241 Conn. 199, 694 A.2d 1319 (1 997) Price v. Phillip Morris, Inc., 219 Ill. 2d 182, 238, 848 N. E.2d 1 (2006) Proctor v. State Farm Mut. Auto. Ins. Co., 675 F.2d 308 (D.C. Cir. 1982)....42, 43 Ramirez v. Health Net of Northeast, Inc., 285 Conn. 1, 938 A.2d 576 (2008) Roher v. Knudson, 349 Mont. 197, 203 P.3d 759 (2009) Schubach v. Household Finance Corp., 375 Mass. 133, 376 N.E.2d 140 (1 978)) Sears, Roebuck & Co. v. F.T.C., 258 F.307 (7th Cir. 1919) Shell Oil Co. v. Wentworth, 822 F.Supp. 878 (D. Conn. 1993) Shore v. Haverson Architecture & Design, P.C., 92 Conn. App. 469, 886 A.2d 837 (2005) Smith v. Snyder, 267 Conn. 456, (2004) Smith v. Wade, 461 U.S. 30 (1 983) xi

13 State v. Acordia, Inc., 31 0 Conn. 1 (201 3) passim State v. Dalzell, 282 Conn. 709, 924 A.2d 809 (2007), abrogated by, Blumberg,-A.3d-, WL State v. Dematteo, 186 Conn. 696, 443 A.2d 91 5 (1982) State v. Lombardo Bros. Mason Contractors, Inc., 307 Conn. 41 2, 54 A.3d 1005 (201 2) Stokes v. Norwich Taxi, LLC, 289 Conn. 465, 958 A.2d 1195 (2008) State v. O'Neill Investigations, Inc., 609 P.2d 520 (Alaska 1980) Stephen Harris v. Bradley Memorial Hospital and Health Center, 306 Conn. 304, (201 2) Sportsmen's Boating Corp. v. Hensley, 192 Conn. 747, 474 A.2d 780 (1984) Terracina v. Fairway Asset Mgmt., Inc., 75 Conn. App. 63, 815 A.2d 157 (2003) Textile Workers v. Lincoln Mills, 353 U.S. 448 (1 957) Thames River Recycling, Inc. v. Gallo, 50 Conn. App. 767, 720 A.2d 242 (1 998)... 26, 27 In re TJX Companies Retail Security Breach Litigation, 564 F.3d 489 (1st Cir. 2009) Tucker v. Service Builders, 180 S.W.3d 109 (Tenn. Ct. App. 2005) Ulbrich v. Groth, 31 0 Conn. 375, A.3d 764 (201 3) passim United States Technologies v. American Home Insurance Company, 118 F. Supp. 2d 174 (D. Conn. 2000) xii

14 United States v. Association of Casualty and Surety Companies, et. al., 63 Civ (S.D. N.Y. 1963)....44, 45 Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 881 A.2d 937 (2005) Web Press Services Corp. v. New London Motors Corp., 203 Conn. 342, 525 A.2d 57 (1987) Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 657 A.2d 21 2 (1 995) Willow Springs Condominium Assn., Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 71 7 A.2d 77 (1 998) Statutes Connecticut Unfair Trade Practices Act, Conn. Gen. Stat passim Connecticut Unfair Insurance Practices Act, Conn. Gen. Stat. 38a passim Federal Trade Commission Act, 15 U.S.C. 45 et seq... passim Conn. Gen. Stat. 1-2z Conn. Gen. Stat Conn. Gen. Stat. 38a-1(10) U.S.C. 1012(b) Conn. Pub. Acts Regulations and legislative History Conn. Agencies Regs. 38a Conn. Agencies Regs. 38a Conn. Agencies Regs. 38a , 8, 9, Conn. H.R. Proc. Vol. 16, Pt. 14, 1973 Sess. at Conn. H.R. Proc. Vol. 19, Pt. 6 at Conn. H.R. Proc. Vol. 19, Pt. 6 at xiii

15 Other Authorities ABA Section of Antitrust Law, Consumer Protection Law Developments (2009) A Am.Jur.2d Neil W. Averitt, The Meaning of "Unfair Acts or Practices" in 5 of the FTC Act, 70 Geo. L. J. 225, (1 980) David L. Belt, The Standard for Determining "Unfair Acts or Practices" Under State Unfair Trade Practice Acts, 80 Conn. B.J. 247, (2006)... 18, 23, 29 David A. Rice, Consumer Unfairness at the FTC: Misadventures in Law and Economics, 52 Geo. Wash. L. Rev. 1, 26 (1 984)... 28, 29 Jean Braucher, Defining Unfairness: Empathy and Economic Analysis at the Federal Trade Commission, 68 B.U.L. Rev. 349, (1 988) Restatement (Second) of Torts, 908( 1) ( 1979) R. Langer, et al., Connecticut Unfair Trade Practices, Connecticut Practice Series, Ed.... passim Richard Craswell, The Identification of Unfair Acts and Practices by the Federal Trade Commission, 1981 Wis. L. Rev. 107, 114 (1 981) Op. Atty. Gen. No (Sept. 23, 2003), 2003 WL xiv

16 INTRODUCTION After more than a decade of litigation, a prior appeal to this Court on class certification, and a seventeen day jury trial, The Hartford does not assert a single error by the trial court in any evidentiary ruling, in its charge to the jury on the CUTPA standard that has been the law of this State for more than thirty years, or argue that the jury's verdict was not supported by the evidence - the usual bases for attacking a judgment on appeal. Instead, faced with the jury's finding that The Hartford violated public policy and well-settled law, The Hartford takes the approach that if you don't like the verdict, change the facts, if your conduct violates the law, change the law, and if all else fails, argue against claims Plaintiffs are not making. Based on evidence unchallenged on this appeal, the jury returned a verdict of $14.7 million, finding that The Hartford violated the Connecticut Unfair Trade Practices Act ("CUTPA") by eliminating the independent judgment of its in-house, statelicensed, staff appraisers, with the effect of dramatically lowering the labor rates paid to the Plaintiff Class of licensed auto repairers. Confronted with this verdict, a punitive damages award of $20 million and imposition of reasonable, limited injunctive relief, The Hartford now invites this Court to nullify the verdict, overturn the trial court's well-reasoned decisions, and provide it with what is, essentially, a retroactive pardon. This Court should reject The Hartford's invitation. As the jury found, The Hartford caused enormous harm to the many small business owners throughout the State that compose the Plaintiff Class by engaging in the very type of unfair trade practices CUTPA was designed to prohibit. The jury verdict, punitive damages award, and injunctive relief should be affirmed in all respects. 1. Plaintiffs' Claims of Unfair Trade Practices. This class action was commenced more than a decade ago by the Auto Body Association of Connecticut ("ABAC") and three auto body shops on behalf of a class of more than one thousand Connecticut auto body shops to challenge unfair practices by which The Hartford forced its staff appraisers to use an artificially low labor rate for auto body repair work in Connecticut. According to The Hartford's own staff appraisers, the labor rate The 1

17 Hartford requires them to use in their appraisals is not actually a "prevailing" or "market" rate. A 140, Rather, this rate is obtained through The Hartford's manipulation and control over a small group of direct repair shops with whom The Hartford has a contractual relationship., A417. See infra at The Hartford suppresses labor rates paid to the Plaintiff Class by directing an increased volume of repairs to its "direct" repair shops so that they will accept a range of concessions on repairs, including accepting a single, uniform, lower labor rate. The Hartford then requires its staff appraisers to use the same labor rate it pays to these direct repair shops in virtually every appraisal, for every auto repair shop, throughout the State, including Plaintiffs' independent repair shops. As Plaintiffs' expert, Dr. Frederic Jennings, established at trial (A346-56), The Hartford is able to impose these conditions based on abuse of power derived from (1 ) the control and superior knowledge it asserts over its insureds at the time of an accident; (2) the reality that auto body shops depend on it for their very livelihoods; and (3) its status as employer of its staff appraisers. The impact of The Hartford's conduct on the Plaintiff Class is evident in the growing disparity between labor rates paid to mechanics and auto body repairers in the State. A , , 345, , 399. Despite the fact that both mechanics and auto body repairers share the same license in Connecticut and perform similar functions, mechanics, who are paid directly by consumers, earn in a range of $70 to $95 an hour, while auto body repairers, which have much higher capital costs, were paid by The Hartford, at the time of trial, a uniform rate throughout the State of about $46 an hour. A 192, The jury concluded that The Hartford's imposition of this suppressed, uniform labor rate caused significant harm to the more than one thousand members of the Plaintiff Class, quantifying that harm to be approximately $1 4.7 million. A The important public policy violated by The Hartford's conduct is both simple and clear - the State regulations setting forth the Code of Ethics for motor vehicle physical 1 All citations to Plaintiffs' appendix shall be designated as "A1 " etc., with citations to Defendant's appendix as "Def. A 1" etc. 2

18 damage appraisers require that physical damage appraisers be fair and impartial when appraising the costs of repairing a vehicle. The regulations mandate that every appraiser shall: (1) Conduct himself in such a manner as to inspire public confidence by fair and honorable dealings; (2) approach the appraisal of damaged property without prejudice against, or favoritism toward, any party involved in order to make fair and impartial appraisals; (3) disregard any efforts on the part of others to influence his judgment in the interests of the parties involved; [and] (4) prepare an independent appraisal of damage. Conn. Agencies Regs. 38a ("Code of Ethics"). A This public policy is not, however, subject to selective application by The Hartford for its commercial advantage. The duty of appraisers to be fair and impartial is not abrogated merely because an appraiser is employed by an insurance company. Nor does it apply only to some of the appraiser's responsibilities, but not others. The appraisal of the costs of repair must be fair all the time, for fil! elements of a damage appraisal, and for fil! parties involved. Webster's Dictionary defines "appraiser" as one who "sets a price for" or "decides the value of." The appraisal regulations expressly define the responsibility of appraisers as including "agreeing on a price for repairing damaged motor vehicles." Conn. Agencies Regs. 38a and A469 (emphasis added). Because the labor rate is an essential element of the price of a repair (i.e. cost of labor= labor time x labor rate), and is included in every damage appraisal, determination of those rates must be conducted by appraisers in accordance with their Code of Ethics established by state regulation. It is that simple. 2. The Hartford's Efforts to Change the Facts of the Case. The Hartford devotes much of its brief to talking about anything other than the relevant facts of record. The Hartford persistently discusses its market share as a distraction from Plaintiffs' straightforward claim that The Hartford unlawfully interferes with the independence of its staff appraisers in every one of the twelve to fifteen thousand repair claims it handles a year in the State of Connecticut. A357. The Hartford misleadingly focuses its arguments exclusively on consumers, even though CUTPA protects businesses, 3

19 as well as consumers. No less than thirty-eight (38) times throughout its brief The Hartford uses the word "negotiate" to describe its conduct, even though the overwhelming evidence presented to the jury was that The Hartford absolutely prohibits any negotiation of labor rates by its staff appraisers, instead dictating to them the rate they must include in their estimates. See infra at The Hartford repeatedly suggests that it has behaved under an "honest claim of right," even though the evidence demonstrated, and the trial court found, that The Hartford intentionally took steps to cover up its unlawful conduct, demonstrating its consciousness of wrongdoing. Def. A243; See infra at And The Hartford couples this with a shameful and knowingly misleading attack on the integrity and intentions of the hardworking class of men and women who merely seek to earn a fair price for their skilled labor, while The Hartford makes billions in corporate profits and pays millions to its corporate executives. A The Trial Court Rejected The Hartford's Efforts to Avoid the Consequences of its Violation of "Deeply Rooted" Public Policy. Not content with mischaracterizing the evidence, The Hartford invents a legal fiction intended to evade the professional obligations imposed on appraisers by State regulation. The Hartford declares that "when appraisers engage in negotiations, they act as employees, not as 'licensed appraisers"' (Def. Br. at 2) - a bizarre proposition with no basis in the law. The Hartford also contends that all elements of a damage appraisal except the labor rate are with in the professional responsibility of appraisers - a contention soundly rejected by the trial court (Def. A ), rebuffed by its own longtime staff appraiser, Michael O'Mara (infra at 9-12), belied by its own "Best Practice" documents and admissions at trial (Def. A184, 376; A383-84), and at odds with the regulations governing the conduct of physical damage appraisers. A It is no wonder that The Hartford's efforts to parse the professional obligations of its staff appraisers were soundly rejected at trial. Def. A The Hartford's machinations do not end there. Unable to prevail in the case it actually tried in 2009, The Hartford has concocted an ex post facto argument that Plaintiffs' 4

20 claim is somehow at odds with the Department of Insurance's ("DOI") interpretation of its own regulations. This claim was first asserted almost two years after the jury's verdict under the false pretense of "newly discovered evidence" by reference to letters authored in 2007 and 2008 by then Commissioner Thomas Sullivan. 2 Contrary to the impression The Hartford attempts to leave with this Court, the trial court flatly rejected the notion that these letters were "newly discovered," entitled to any judicial deference, or otherwise persuasive. Def. A See infra at Describing the operative public policy as "deeply rooted in the appraiser's independence from outside influence - even from the company that employs the appraiser,'' the trial court held, in no uncertain terms, that: Despite what Commissioner Sullivan says in his letter, appraisers have to 'determine' labor rates. There is no other way the appraiser could get to the bottom line dollar amount of the appraisal.... [l]t is undisputed that the appraiser must make a determination of a labor rate which reflects the cost of repairing the car and, in making that determination. [sic] The Code of Ethics requires him to do so fairly and honestly without outside influence from anyone." Def. A (emphasis added). The trial court further noted (Def. A 185) that the 2008 letter actually endorses Plaintiffs' common sense claim, stating that the job of appraisers includes exercising "judgment" in "determining labor rates" based on those "in the marketplace in general,'' (A679) statements nowhere acknowledged by The Hartford in its selective and misleading discussion of these letters in its brief to this Court. In the course of dismantling The Hartford's claims regarding the DOI letters, the trial court also rejected The Hartford's argument that, because the DOI has stated it has no authority to "set" or "regulate" labor rates, it somehow follows that the appraiser Code of Ethics does not apply to determination of labor rates used to prepare damage appraisals. Def. A This argument is misleading. Whether or not the DOI can set or regulate 2 Former Commissioner Sullivan had previously spent more than twenty years as an employee of The Hartford and his wife served in Defendant's legal department at the time these letters were written. A255-56, 393. Plaintiffs have come to learn through discovery in another case that, contrary to its representations to the trial court, The Hartford's paid lobbyist was in possession of the September 27, 2007 letter all along, acquiring it in or about 2007 (A703-05), and that it was his custom and practice to provide such information to his clients, including The Hartford. A ,

21 labor rates has no bearing on the issue in this case, which is whether appraisers are bound by Connecticut State regulations to be fair and impartial in preparing damage appraisals. The trial court did not abuse its discretion in denying Defendant's belated motion to reconsider based on these two letters (see infra at 32-34), and this Court, likewise, should not be taken in by such gamesmanship. Following the denial of its motion to reconsider, The Hartford engaged in yet another effort to contrive an ex post facto document for appeal, this time privately lobbying in 201 3, without public hearing, for issuance of Bulletin No. IC-34, which, in any event, does nothing more than restate one paragraph from the 2007 letter. Notably, the Insurance Association of Connecticut (the "IAC"), the leading insurance industry lobbyist in Connecticut, did not participate in this back door lobbying process because it was not considered to be within the "collective" interests of its members. A The Hartford was so desperate to nullify the jury's verdict by post-hoc administrative fiat that it actually attempted to contact the Insurance Commissioner while he was on vacation in Switzerland in order to obtain issuance of the bulletin. A The Hartford also misleadingly contends that the jury verdict rests on a "neverbefore-articulated penumbra of a written law," repeatedly misquoting the trial Court's decision on punitive damages (Def. A239) as supporting that proposition. Def. Br. at 11, 17, 33, 38. This invented phrase has no basis in the record. In fact, Plaintiffs established a direct violation of public policy based on the jury's finding that The Hartford forces its staff appraisers to violate their Code of Ethics as a condition of employment and The Hartford is legally responsible for their violation under the doctrine of respondeat superior, which was part of the jury charge. Def. A41 9. As a procedural matter, the general verdict rule precludes this Court from concluding that the verdict was based on violation of the penumbra of a public policy because the jury interrogatory does not state whether or not the verdict is based on a penumbra of a right. A59. Even assuming, arguendo, that it was 6

22 relied upon by the jury, the concept of penumbra is firmly established in the law and has strong evidentiary support in the record. See infra at The Hartford's Effort to Change the Law. At the heart of this appeal is The Hartford's effort to change the "well-settled" legal standards for determining liability under CUTPA by abandoning the cigarette rule and more than three decades of legal jurisprudence in Connecticut. The effort is misguided from the outset. As a threshold matter, the plain language of CUTPA stating that "courts of this state shall be guided by interpretations given by the Federal Trade Commission and the federal courts to 5(a)(1) of the Federal Trade Commission Act," ("FTC Act") neither compels nor supports such a change. See infra at The substantial injury test standard proposed by The Hartford was actually included by Congress in a 1994 amendment to 5(n), not 5(a)(1 ), of the FTC Act. Because the test proposed by The Hartford is not in the section of the FTC Act referenced in CUTPA, rules of statutory construction dictate that no change is warranted. This conclusion is consistent with the intent expressly stated by Congress in the Senate record that the amendment to 5(n), as opposed to 5(a)(1 ), was only intended to limit the FTC's jurisdiction, without affecting, in any way, the development of the law of unfairness under the various state unfair trade practices statutes, of which CUTPA is one. The Hartford's efforts to rewrite the CUTPA liability standard thus proceeds from a false premise. Should the Court proceed beyond this threshold issue, there are compelling legal and public policy reasons briefed in detail below (infra at 20-32) why the standard should not be changed from the cigarette rule to the more restrictive and far more vague substantial inj ury test. The reasons - most of which have never before been fully briefed to this Court, see Ulbrich v. Groth, 31 0 Conn. 375, (201 3) (Zarella, J. concurring in part and dissenting in part) - provide compelling grounds for rejecting the change urged by the Hartford. 3 3 The Hartford attempts (Def. Br. at 41-42) to spin the trial court's narrow decision lifting the stay of injunctive relief pending appeal into some crystal ball prediction of what this Court 7

23 Plaintiffs further set forth below (infra at 31-32) why serious discovery violations by The Hartford render this case unsuitable for considering a change of the law. The Hartford was sanctioned for failing to produce financial information relating to insurance costs, the non-disclosure of which materially impaired Plaintiffs' ability at trial to challenge claims going directly to the substantial injury test - the very standard The Hartford is urging this Court to adopt. The Hartford cannot withhold evidence and then argue on appeal that the case should be decided under a new legal standard that would make the withheld evidence vital to Plaintiffs' case. 5. The Hartford Cannot Avail Itself of Preemption Under Acordia. Defendant belatedly argues that Plaintiffs' CUTPA claim is supposedly preempted by the Connecticut Unfair Insurance Practices Act ("CUIPA"), citing this Court's recent decision in State v. Acordia, Inc., 31 0 Conn. 1 (201 3). This is wrong for three reasons: (1) Defendant failed to preserve the claim for appeal; (2) a dispute between auto body repair shops and an insurance company regarding appraisal and payment for repair services does not constitute "the business of insurance" and is, therefore, outside the scope of CUIPA; and (3) the Appraiser Code of Ethics provides an independent basis for a CUTPA violation. See infra at Remarkably, Defendant advances this argument without even acknowledging the United States Supreme Court's pronouncement in Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S. 205 (1 979), that business arising between insurance companies and auto body repairers does not constitute the "business of insurance." 6. The Awards of Punitive Damages and Injunctive Relief Must Stand. Lastly, in order to avoid the trial court's award of punitive damages and injunctive relief, The Hartford twists the law of punitive damages and injunctions beyond recognition. See infra at Based on the overwhelming trial record cataloguing the severity of The might do with regard to the CUTPA standard, a fanciful argument ig noring the reality that the trial court repeatedly applied the well-settled cigarette rule in this case, stated that it did not "project that those rulings will be found erroneous," and was not privy to the extensive briefing of the issue presented here. Def. A262. 8

24 Hartford's misconduct, its knowing efforts to conceal said conduct, and its stated intention to continue its unfair trade practices with impunity, the trial court has not abused its discretion in its measured and well-reasoned rulings. STATEMENT OF FACTS AND PROCEEDINGS I. The Jury Verdict and Jury Interrogatories. This appeal arises from entry of a jury verdict and award in favor of the Plaintiff Class of $14.7 million premised upon the jury's finding that "plaintiffs prove[d] by a preponderance of the evidence that the Defendant's conduct or practices regarding hourly labor rates to be paid to the plaintiffs for auto body repair services was an unfair trade practice" offending the public policy found in "Sec. 38a of Conduct of Motor Vehicle Physical Damage Appraisers." A II. The Hartford's Conduct Clearly Violates CUTPA Because it Offends Connecticut Public Policy Under the Physical Damage Appraisers' Code of Ethics. A. The Evidence at Trial was Clear; The Hartford Required its Appraisers to Violate their Responsibility to Conduct Fair and Impartial Appraisals. When a Hartford insured is in an accident, the damaged vehicle must be appraised by in-house, staff appraisers, employed and controlled by The Hartford, referred to as Auto Service Representatives ("ASRs"). Def. A290. The Hartford successfully eliminated the use of independent appraisers employed by outside agencies through a campaign entitled "Just Say No to IA's." A421. See also A208-09, 447. The Hartford systematically eliminates the independence of its staff appraisers. The most compelling evidence at trial was offered by its own long-time employees. A ; In a 2002 letter to the Attorney General, copied to the DOI, four staff appraisers, each of whom had been writing damage estimates at The Hartford for decades (A 108-9; ; Def. A ), voiced significant concerns that The Hartford's practices caused them to violate their Code of Ethics. The appraisers stated: The Insurance Company established parameters for what labor rates are paid and directs its staff accordingly. Labor rate disputes are normally escalated 9

25 to the Team Leader, at which point the most common approach seems to be for the T earn Leader to tell the shop that they are able to get the work done, and obtain agreed figures with other shops in that area, for what they are paying. That labor rate, therefore, is what they consider the prevailing rate to be and they won't pay more than that.... Our concern here is from the appraiser's position. Wouldn't the Code of Ethics require an appraiser to write their estimates at whatever rate they honestly felt was fair and reasonable? Considering the widening gap between autobody repair and mechanical service rates, we cannot honestly say that we believe the current 'prevailing rate' of dollars an hour is fair. In fact, we believe that is very low due to Insurer influence, and not due to market influence. The problem is obvious. If we were to write estimates at a rate we believe to be fair and reasonable, as we believe the law mandates, we would be terminated. A399 (emphasis added). One of the authors of the 2002 letter, Michael O'Mara, who had prepared more than twenty thousand appraisals during his decades at The Hartford (A , 194), further testified at trial that: (1) The Hartford won't pay more than what it considers to be the prevailing rate (A , 136); (2) the rate The Hartford was telling O'Mara to write was not fair and reasonable and was very low due to The Hartford's influence (A 137, 140); and (3) if The Hartford did not impose limits upon him, he would have written a rate at what he believed to be fair and reasonable. A Indeed, the labor rates paid by The Hartford were virtually uniform throughout the state (A141-42, ), and stayed constant at $38 an hour for a five to seven year period, despite increases in the cost of living. Def. A382. Mr. O'Mara testified that body shops have never agreed to these lower rates. A Mr. O'Mara further testified that "there were certain pressures being applied that limited our ability to produce what we felt was a fair and unbiased appraisal." A 130. Such "pressu res" included that appraisers' compliance with The Hartford's "Best Practices" affected their performance evaluations and whether or not they received a salary raise or bonus. A , The Hartford's staff appraisers were forced to toe the line by a rigorous, employee evaluation and review procedure ( A ) which included, among other things, (1) preprogrammed "master profiles" (A446) set on the staff appraisers' laptops mandating a predetermined labor rate, and software utilizing "QAAR rules" that created notifications if the appraiser deviated from that set labor rate (A427; see also A ; 10

26 , 436); (2) daily, weekly, monthly and annual reviews of staff appraiser estimates to determine whether they complied with metrics established and imposed by The Hartford ( A , ), including the labor rate (A ); and (3) a painstaking and rigorous structure of reviews up the line of authority, from staff appraiser, to their team leaders, to state managers, each conducted not only by their immediate supervisors, but also by a separate corporate audit department, referred to as "reinspection services" (e.:.9.:_ A412, 41 3, 422); even the audit employees were reviewed to see whether they had properly identified estimate deviations as defined by The Hartford. See also A (complaints about RIS). In addition to affecting employee evaluations and bonuses, failure to comply with The Hartford's appraisal standards resulted in employee discipline. A425, , , 31 1, See also of April 17, 2000 from Louis J. Chasse to staff appraisers (Def. A382) cited by the trial court as just one example of the "heavy dose of control over labor rates to be written by its licensed appraisers." Def. A243. Mr. O'Mara testified that in light of the practices in place at The Hartford, he did not feel he could prepare an unbiased appraisal (A 152) and that he and the other appraisers were unable to use independent judgment and discretion. A 159. Appraisers, according to Mr. O'Mara, "were being influenced by an outside party, in my view. And the insurance department regulations specifically prohibit that." A 148. Plaintiffs' expert, Dr. Frederic Jennings, testified on the issue of causation, explaining that The Hartford, in exchange for directing increased volume of work to its direct repair shops, receives concessions from them to charge lower labor rates, which it then uses as a hammer to force the class members to work for the same rates. A346-55,366-67, A417 (See also A261-67, ) (documents and testimony discussing The Hartford's practices of limiting the number of direct repair shops and "taking steps to ensure significant flow of business to [these] member shops"). Dr. Jennings (A358-63), along with the named Plaintiffs ( A ) and a mechanical shop owner, Robert Trez (A ), testified why the mechanic rates are a fair proxy for determining that the labor rates paid by The 11

27 Hartford for auto body repairs are unreasonably low. Plaintiffs also testified that, in the infrequent instances where customers without insurance need repairs, they are paid their posted labor rates, which are generally determined by Plaintiffs in consultation with their accountants, taking into account the costs of doing business and the desire to earn a reasonable profit. A88-89, , , B. The Hartford's Efforts to Cover Up its Labor Rate Practices Evidences its Knowing Violation of Connecticut Public Policy. The trial court expressly held that The Hartford attempted to cover up its conduct: The Hartford's actions to control the judgment of its appraisers was a knowing and purposeful disregard of the policy of independence inherent in the Code of Ethics as evidenced by its efforts to hide or cover up its conduct, including instructions to its employees not to write anything down about labor rates, in favor of off-the-record conversations. We have to be VERY careful about publishing anything about Labor Rates. But I may have a solution. Call me tomorrow. (Def. A243; 385) (emphasis added). The Hartford's effort to conceal its conduct was also made clear by Mr. O'Mara's testimony concerning terminology used by The Hartford to create the impression that its labor rates were fair, when the reality was anything but: Q: Why did you put the words prevailing rate in quotation marks? A: Because I don't really believe it is a prevailing rate. The argument that insurance companies have always made over the years is that they are paying what the prevailing rate is. But the prevailing rate that they have established because they have shops on the program that are willing to accept that rate, is not really establishing a prevailing rate. A 140. Similarly, Mr. O'Mara testified that other terminology used by The Hartford in its "Best Practices" documents, which are frequently referred to as "suggestions," was similarly misleading and intended to create the false impression that its appraisers had discretion: Q: Now, you put the word suggested in quotations; why? A: Because I felt that it was just in there to make it appear that we had more independent discretion and judgment than we really did. Q: Now, it says here - it goes on to say that these standards are obviously much more than suggestions.... What did you mean by that statement? A: Well, the standards were instructing us what we could and could not do, not suggesting. I think, again, the fact that they called it suggesting wanted it to appear that we had more judgment than we really did. 12

28 A 142. See also A (referring to "tips" v. "rules"), ("goal" v. "target"). When the concerns of these appraisers were raised with their superiors at The Hartford, the response of management was not to change the practices, but rather to provide indemnity agreements to protect the appraisers in case they were directly sued for their illegal conduct. A , When members of the Plaintiff Class complained to The Hartford about their practices, The Hartford branded them as "militant" and refused to allow their staff appraisers to negotiate the labor rates. A41 1. And when efforts were made by Plaintiffs to collect from its customers the difference between what they thought was a fair and reasonable labor rate and cost of repair, and what The Hartford would pay, Defendant obstructed those efforts by instructing the insured not to pay. A C. The Trial Court's Charge Provided the Only Reasonable Interpretation of the Code of Ethics. In response to questions from the jury, the trial court addressed the scope of the Appraiser Code of Ethics, explaining that an appraiser, in carrying out his or her duties, "must" assess the cost of repairing damage, "which necessarily involves estimating the cost of replacement parts, the number of hours needed to complete the repairs and a reasonable hourly rate to be applied to those hours." A (emphasis added). The Court concluded by instructing the jury that [l]f you do find that appraiser independence has been interfered with or has caused favoritism toward or against any party involved or that an appraiser has not disregarded any efforts by any party such as but not limited to an insurance company to influence his or her judgment, then you may find on that basis that the public policy of the code of ethics Section 38a has been offended. A389. Ill. Post-Trial Decisions A. Motions to Set Aside the Verdict. Following trial, Defendant moved to set aside the $14.7 million verdict, which was denied by decision dated October 14, Def. A1 16. Over seven months later, on or about June 10, , The Hartford moved to reconsider this earlier denial based on the false claim that the 2007 and 2008 Sullivan letters were "newly discovered" evidence. Def. 13